We have changed the revenue presentation to align to internal business focus areas. Voice revenue is classified as usage or subscription revenue and customer premises equipment and sales revenue is disclosed separately. Prior year numbers have been restated to reflect the new presentation format.
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Voice | 16,818 | 17,668 | (4.8) |
| Fixed-line usage | 8,591 | 9,501 | (9.6) |
| Fixed-line subscription | 7,743 | 7,643 | 1.3 |
| Mobile voice and subscriptions | 484 | 524 | (7.6) |
| Interconnection | 1,597 | 1,855 | (13.9) |
| Fixed-line domestic | 562 | 633 | (11.2) |
| Fixed-line international | 959 | 1,120 | (14.4) |
| Mobile interconnection | 76 | 102 | (25.5) |
| Data | 10,801 | 10,237 | 5.5 |
| Data connectivity | 5,595 | 5,339 | 4.8 |
| Leased line facilites | 1,963 | 2,051 | (4.3) |
| Internet access and related services | 1,617 | 1,649 | (1.9) |
| Managed data networks services | 1,005 | 899 | 11.8 |
| Multi-media services | 52 | 52 | - |
| Mobile data | 364 | 163 | 123.3 |
| Cynernest | 205 | 84 | 144.0 |
| Customer premises equipment sales and rentals | 1,466 | 1,401 | 4.6 |
| Sales | 327 | 430 | (23.9) |
| Rentals | 704 | 652 | 8.0 |
| Mobile handset and equipment sales | 435 | 319 | 36.4 |
| Other | 227 | 284 | (20.1) |
| iWayAfrica | 358 | 364 | (1.6) |
| Trudon | 1,140 | 1,166 | (2.2) |
| Swiftnet | 94 | 104 | (9.6) |
| Total | 32,501 | 33,079 | (1.7) |
Group operating revenue decreased by 1.7% to R32,501 million (2012: R33,079 million) for the year ended 31 March 2013. The decrease is mainly due to lower fixed-line voice usage revenue, partially offset by an increase in mobile and data revenue.
Fixed-line voice usage revenue decreased 9.6% to R8,591 million (2012: R9,501 million) largely as a result of a 4.9% decrease in voice minutes mainly due to continued mobile substitution, the impact of the decrease in fixed termination rates of approximately R136 million and a decrease of approximately R118 million relating to the pass-through of 33% of the decrease in mobile termination rates to fixed-line customers from 1 August 2012. The 4.9% decrease in the number of lines also contributed to the decrease.
Fixed-line subscriptions revenue increased 1.3% to R7,743 million (2012: R7,643 million) as a result of a 5% and 6% increase in residential and prepaid line rental tariffs effective 1 August 2011 and 1 August 2012, respectively, partially offset by the decrease in the number of lines.
Mobile voice revenue decreased 7.6% and interconnection revenue decreased 25.5% as a result of a 15.3% decrease in the number of post-paid subscribers as well as a 17.1% decrease in blended ARPU. The decrease in post-paid subscribers was due to a clean-up of debtors and an improvement to the credit vetting systems.
Fixed-line domestic interconnection revenue decreased 11.2% to R562 million (2012: R633 million) primarily due to the 18% average decrease in fixed termination rates.
Fixed-line international interconnection revenue decreased by 14.4% to R959 million (2012: R1,120 million) largely as a result of the loss of traffic due to competitors using their own routes.
Data connectivity increased 4.8% to R5,595 million (2012: R5,339 million) as a result of a 5.2% increase in the number of ADSL subscribers to 870,505 (2012: 827,091).
Revenue from mobile leased line facilities decreased 4.3% to R1,963 million (2012: R2,051 million) due to continued self provisioning by other operators.
Internet access revenue decreased 1.9% due to a decrease in wholesale internet exchange ports leased.
Managed data network services revenue increased 11.8% to R1,005 million (2012: R899 million) as a result of a 13.9% increase in the number of sites to 44,328 (2012: 38,902).
Mobile data revenue increased 123.3% due to an increase in the number of data subscribers and the data deals and promotional products launched during the year in line with our strategy to focus on data. Telkom Mobile's share of all mobile operators' year on year data revenue growth was 8.6%.
Cybernest's data revenue increased 144.0% to R205 million (2012: R84 million) as a result of good traction in the IT market with key strategic wins.
Customer premises equipment sales decreased 23.9% to R327 million (2012: R430 million) due to the discontinuation of the sale of PC and gaming equipment as it does not from part of Telkom's primary business.
Customer premises equipment rentals increased 8.0% to R704 million (2012: R652 million) due to an increase in tariffs.
Mobile handset and equipment sales revenue increased 36.4% mainly as a result of the bulk sales of Apple handsets to an Apple authorised distributor.
Other revenue decreased 20.1% to R227 million (2012: R284 million) due to lower revenue recognised from expired cards, partially offset by higher co-location revenue.
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Telkom | 320 | 526 | (39.2) |
| iWayAfrica | 44 | 10 | 340.0 |
| Trudon | 34 | 40 | (15.0) |
| Swiftnet | 4 | 3 | 33.3 |
| Total | 402 | 579 | (30.6) |
Other income includes profit on the disposal of investments, property, plant and equipment and intangible assets, royalty income as well as interest received from debtors. Other income in the 2012 financial year includes the profit on disposal of Multi-Links of R167 million and a donation of two mobile base station controllers received from a supplier. iWayAfric's other income includes R30 million profit on disposal of investment in joint venture in the 2013 financial year.
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Employee expenses | 9,861 | 8,636 | (14.2) |
| Payment to other operators | 4,678 | 5,484 | 14.7 |
| Selling,general and administrative expenses | 7,216 | 7,193 | (0.3) |
| Service fees | 3,103 | 2,974 | (4.3) |
| Operating leases | 936 | 825 | (13.5) |
| Depreciation,amortisation,impairments and write-offs | 18,156 | 6,138 | (195,8) |
| Total | 43,950 | 31,250 | (40.6) |
Group operating expenses increased by 40.6% to R43,950 million (2012: R31,250 million) in the year ended 31 March 2013, primarily due to the R12 billion impairment of legacy assets, R434 million net provision, after curtailment gains for the voluntary severance and early retirement packages, R592 million provision for the fine handed down to Telkom by the Competition Tribunal and other legal matters, the average annual salary increases of 6.5% and accelerated depreciation of R667 million. This was partially offset by a decrease in payments to other operators due to the decrease in mobile termination rates and the R569 million impairment of iWayAfrica in the 2012 financial year.
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Telkom | 42,714 | 29,482 | (44.9) |
| iWayAfrica | 488 | 1,017 | 52.0 |
| Trudon | 640 | 644 | 0.6 |
| Swiftnet | 108 | 107 | (0.9) |
| Total | 43,950 | 31,250 | (40.6) |
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Employee expenses | 9,493 | 8,294 | (14.5) |
| Salaries and wages | 7,285 | 6,754 | (7.9) |
| Benefits | 1,975 | 2,017 | 2.1 |
| Workforce reduction expenses | 753 | 29 | (2,496.6) |
| Employee related expenses capitalised | (520) | (506) | (2.8) |
| Payments to other network operators | 4,430 | 5,520 | 15.6 |
| Mobile network operators | 2,897 | 3,599 | 19.5 |
| International network operators | 904 | 1,045 | 13.5 |
| Fixed-line network operators | 368 | 320 | (15.0) |
| Data commitments | 261 | 286 | 8.7 |
| Selling,general and administrative expenses | 6,743 | 6,760 | 0.3 |
| Materials and maintenance | 3,104 | 2,671 | (16.2) |
| Marketing | 937 | 1,009 | 7.1 |
| Bad debts | 315 | 550 | 42.7 |
| Other | 2,387 | 2,530 | 5.6 |
| Service fees | 3,075 | 2,955 | (4.1) |
| Property management | 1,659 | 1,502 | (10.5) |
| Consultants,security and other | 1,416 | 1,453 | 2.5 |
| Operating leases | 880 | 756 | (16.4) |
| Buildings | 385 | 282 | (36.5) |
| Equipment | 35 | 29 | (20.7) |
| Vehicles | 460 | 445 | (3.4) |
| Depreciation,amortisation,impairment and write-offs | 18,093 | 5,467 | (230.9) |
| Depreciation | 5,044 | 4,535 | (11.2) |
| Amortisation | 873 | 657 | (32.9) |
| Impairments and write-offs | 12,176 | 275 | (4,327.6) |
| Total | 42,714 | 29,482 | (44.9) |
Employee expenses increased by 14.5% in the year ended 31 March 2013, primarily due to the R434 million cost relating to voluntary severance and early retirement packages, the average annual salary increase of 6.5% and a higher bonus provision. 1,411 bargaining unit and 178 management employees exited up to 31 May 2013 as part of the process.
Payments to mobile operators decreased 19.5% due to the reduction in mobile termination rates from 73 cents to 56 cents with effect from 1 March 2012.
Selling, general and administrative expenses decreased by 0.3% to R6,743 million (2012: R6,760 million). Materials and maintenance increased 16.2% mainly due to expenditure on data processing equipment for the mobile business systems and on the integration of independent business systems as well as growth in external customer infrastructure by Cybernest.
Marketing expenses decreased 7.1% due to lower marketing expenditure by Telkom Mobile.
Bad debts decreased 42.7% due to an improvement to the mobile credit vetting systems.
The decrease in the other category was primarily as a result of a decrease in mobile sales acquisition cost as we refocus our convergence strategy, partially offset by the provision for the fine imposed by the Competition Tribunal and a higher spectrum licence fee provision due to the change in the regulation.
Property management expenses increased 10.5% mainly due annual increases in electricity and water.
Lower consulting fees were incurred in the current year as the prior year included fees relating to the Multi-Links transaction, strategic workforce planning and increasing efficiencies through a shared services centre, partially offset by higher mobile consulting fees for building capacity in marketing, sales, network and commercial areas.
Operating leases increased 16.4% as a result of an increase in the number of mobile sites acquired and higher building leases.
Depreciation increased 11.2% due to accelerated depreciation as a result of the review of the useful lives of the existing network equipment as we invest to transform to a commercially-led next-generation network. Amortisation also increased 32.9% as a result of the review of the useful lives of the existing software systems. Impairment and write-offs increased significantly due to the impairment of legacy assets.
Details of operating expenditure related to our mobile business that is included in Telkom's operating expenditure are provided below for additional information to monitor Telkom Mobile as a start-up business.
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Employee expenses | 329 | 195 | (68.7) |
| Payments to other network operators | 482 | 449 | (7.3) |
| Selling,general and administrative expenses | 1,787 | 2,428 | 26.4 |
| Service fees | 249 | 152 | (63.8) |
| Operating leases | 187 | 99 | (88.9) |
| Depreciation,amortisation,impairments and write-offs | 372 | 219 | (69.9) |
| Total | 3,406 | 3,542 | 3.8 |
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Telkom | 6,608 | 7,956 | (16.9) |
| EBITDA margin(%) | 21.4 | 25.3 | (3.9) |
| Trudon | 580 | 597 | (2.8) |
| EBITDA margin(%) | 50.9 | 51.2 | (0.3) |
| Swiftnet | 7 | 19 | 64.0 |
| EBITDA margin(%) | 7.4 | 18.3 | (10.9) |
| iWayAfrica | (86) | (26) | (231.2) |
| EBITDA margin(%) | (24.1) | (7.1) | (17.0) |
| Total | 7,109 | 8,546 | (16.8) |
Investment income consists of interest received on short-term investments and bank accounts. Investment income increased by 26.5% to R301 million (2012: R238 million) as a result of higher cash balances.
Finance charges include interest paid on local and foreign borrowings, amortised discounts on bonds and commercial paper bills, fair value gains and losses on financial instruments and foreign exchange gains and losses on foreign currency denominated transactions and balances.
Foreign exchange and fair value losses decreased significantly to a gain of R397 million (2012: loss of R1,107 million). The decrease was mainly due to the cumulative amount of exchange differences of R1,292 million previously recognised in equity, recognised in profit and loss on disposal of Multi-Links in the prior year. A higher fair value gain on assets held by the Cell Captive also contributed. The interest expense decreased 13.7% to R660 million (2012: R765 million) mainly as a result of lower interest rates and a 7.4% decrease in interest-bearing debt.
The consolidated tax expense from continuing operations decreased to R490 million (2012: R595 million) due to lower taxable profit in the 2013 financial year and secondary tax on companies included in the prior year. The consolidated effective tax rate for the year ended 31 March 2013, excluding the R12 billion impairment charge and non-deductable Competition Commission fine is 50.6%. The consolidated effective tax rate for the 2012 financial year was 33.4% if the effect of the sale of Multi-Links and the Group impairment of iWayAfrica is excluded. The higher effective tax rate in the 2013 financial year is mainly as a result of higher non-deductable expenditure including the provision for the Competition Tribunal fine.
The Group's capital structure remains strong. Net debt, after financial assets and liabilities, from continuing operations decreased by 46.0% to R2,122 million from R3,933 million as at 31 March 2012 resulting in a net debt to EBITDA ratio of 0.3 times at 31 March 2013 and 0.5 times at 31 March 2012. On 31 March 2013, the Group had cash balances, including other financial assets and liabilities, of R4,464 million (2012: R3,231 million).
The Group's current liabilities exceeded current assets by R1,491 million (2012: current assets exceeded current liabilities by R497 million). Current liabilities increased in the 2013 financial year due to the syndicated loan of R2.0 billion reaching maturity in December 2013.
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Cash generated from operations before dividends paid | 7,651 | 6,704 | 14.1 |
| Less: Cash flows investing activities | (5,519) | (4,907) | 12.5 |
| Free Cash Flow | 2,132 | 1,797 | 18.6 |
Free cash flow increased 18.6% to R2,132 million (2012: R1,797 million) due to a 14.1% increase in cash generated from operations and a decrease in our investment in repurchase agreements, partially offset by a 20.0% increase in capital expenditure. Cash generated from operations increased 14.1% despite a 16.8% decrease in EBITDA due to higher non-cash items such as the provision for the Competition Tribunal fine, voluntary severance and early retirement packages and the post retirement medical aid provision as well as a decrease in taxation paid.
Group capital expenditure, which includes spend on intangible assets, increased by 20.0% to R5,738 million (2012: R4,783 million) and represents 17.7% of Group operating revenue (2012: 14.5%).
Year ended 31 March |
|||
|---|---|---|---|
| In ZAR millions | 2013 |
2012 |
% |
| Baseline | 2,057 | 1,858 | (10.7) |
| Network evolution | 1,232 | 733 | (68.1) |
| Mobile | 1,548 | 1,372 | (12.8) |
| Sustainment | 310 | 146 | (112.3) |
| Effectiveness and efficiency | 121 | 162 | 25.3 |
| Support | 342 | 329 | (4.0) |
| Regulartory and other | 26 | 61 | 57.4 |
| iWayAfrica | 5 | 8 | 37.5 |
| Trudon | 63 | 72 | 12.5 |
| Swiftnet | 34 | 42 | 19.0 |
| Total | 5,738 | 4,783 | (20.0) |
Baseline capital expenditure of R2,057 million (2012: R1,858 million) was largely for the deployment of technologies to support the growing data services business, links to the mobile cellular operators and expenditure for access line deployment in selected high-growth commercial and business areas. The increased expenditure for the year can be attributed to growth in the IP Network and Customer Specific Solutions and the transport network.
Expenditure on network evolution of R1,232 million (2012: R733 million) was mainly for the initial phase rollout of the Next Generation Network programme to modernise the legacy voice network, provide high speed ADSL service in selected areas and address the associated operational and business support systems. Expenditure has increased as the programme progressed beyond the pilot phase.
Mobile capital expenditure increased 12.8% as we continue to invest in our mobile network and distribution channels.
The sustainment category expenditure of R310 million (2012: R146 million) was largely for the replacement of obsolete power systems as well as the replacement and modernisation of the access and core network. The increase for the year can be attributed to the replacement of obsolete equipment in the core transport network.
The decrease in the effectiveness and efficiency category was mainly due to expenditure on management systems in the prior year not recurring.
The support capital expenditure of R342 million (2012: R329 million) is mainly for provision of new buildings and building extensions in support of network growth and for the compliance upgrading of existing equipment buildings, including the associated AC power and air-conditioning.
The expenditure on regulatory requirements of R26 million (2012: R61 million) is primarily to institute regulatory changes to customer-facing functions. A number of projects are reaching conclusion, resulting in a reduced expenditure over the year.